Union Pacific 2011 Annual Report Download - page 28

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28
Higher volume, price improvements, and fuel surcharges increased freight revenue from chemicals in
2010 versus 2009. Reduced inventories and purchases delayed from 2009 increased fertilizer shipments
by 30% in 2010. A modest rebound in market conditions and more normalized inventory levels increased
demand for industrial chemicals during the year, driving volume levels up 8% versus 2009. In addition,
shipments of soda ash increased 12% as continued strong export demand outpaced weak 2009 export
demand.
Energy – Core pricing gains, higher fuel surcharges, and
increased volume grew energy freight revenue from
2010 levels. Shipments of coal from the Southern
Powder River Basin (SPRB) were up 5% in 2011
compared to 2010, reflecting new business to Wisconsin
facilities and the start-up of a new power plant near
Waco, Texas. Completion of a year-long equipment
relocation process at one of the mines in the third
quarter of 2011 and minimal production problems
elsewhere improved shipments from Colorado and Utah
by 3% in 2011 versus 2010. These gains, along with
increased exports to Europe and Asia, offset first half
production problems and weak demand from eastern
coal utilities.
Core pricing gains, higher fuel surcharges and modest volume growth increased freight revenue from
energy shipments in 2010 compared to 2009. Shipments from the SPRB were up 4%, driven by higher
demand resulting from improved economic conditions, warmer summer weather, and more efficient
deliveries (higher tons per car and increased train size). Higher inventory levels carried over from 2009
partially offset this demand increase. Shipments from Colorado and Utah mines were down 8% in 2010
versus 2009 due to mine production interruptions and increased competition from other low cost fuel
options (natural gas and eastern coal), weaker demand from our industrial customers, and high
inventories at some utility customer locations.
Industrial Products – Increased volume, fuel
surcharges, and core pricing improvement increased
freight revenue from industrial products in 2011 versus
2010. Shipments of non-metallic minerals (primarily
frac sand) grew in response to a dramatic rise in
horizontal drilling activity for natural gas and oil, while
steel shipments increased due to higher demand for
steel coils and plate for automotive and pipe
production. In addition, an increase in iron ore export
business to China also drove volume growth.
Conversely, lower commercial construction activity
reduced stone, sand and gravel shipments in 2011
compared to 2010.
Volume gains, core pricing improvement, and higher
fuel surcharges increased freight revenue from industrial products in 2010 versus 2009. A federal
government remediation program involving removal of uranium mill tailings from a Moab, Utah, site drove
an increase in short-haul hazardous waste shipments versus 2009. Shipments under this program began
modestly during the second quarter of 2009. Steel shipments also increased due to improving economic
conditions, while shipments of non-metallic minerals (primarily frac sand) grew in response to more
drilling for natural gas. Stone, sand and gravel shipments grew in 2010 compared to 2009 as increased
oil drilling more than offset the decline in commercial construction activity.
2011 Energy Revenue
2011 Industrial Products Revenue